BOOK: Murphy/Higgins: CONCEPTS IN FEDERAL TAXATION 2019, 26TH EDITION

Memorandum TO: FROM: DATE: RE: Associate Partner November 5, 2018 Client Jefferson Smith Education Expenses I met with our client, Jefferson, this afternoon and I need your assistance. We are currently advising Jefferson on his 2018 tax return. We would like some advice concerning possible education deductions and credits by December 7, 2018. Jefferson works as a fisherman (as an employee) in Florida from October through December. For the current year, his wages are $80,000. Recently, Jefferson decided to go to college to become an accountant. In 2018, he enrolled in the local University to start his degree, he has been taking on-line courses as a full-time student since then. Jefferson is a single taxpayer with no dependents and claims the standard deduction. No one else can claim him as a dependent. His income tax bracket is 25%. He incurred qualified educational expenses of $7,000 for 2018. I have prepared a preliminary tax return without taking into account any education deductions or credits. The current 2018 figures are as follows: Gross Income= $80,000 Adjusted Gross Income=80,000 Taxable income = $68,000 Income tax due before any education deductions/credits = $17,400 Read page 6-29 (Section 6-3d in the ebook), page 8-24 (Section 8-7b in the ebook) and pages 8-29 through 8-31(the section on Higher Education Tax Credits in the ebook) of the text to familiarize yourself with: 1) the Deduction for Higher Education Expenses, 2) the American Opportunity Credit, and 3) the Lifetime Learning Credit. Afterwards, please prepare a memo to me so that I can advise Jefferson of the best course of action to minimize his taxes. In your memorandum you should answer the following questions: 1) What are the available deductions and credits for Jeffersons education expenses? 2 2) Which of these options is best for Jefferson and Why? 3) What will his final tax bill be after considering the education tax breaks? Please note that you should explain WHY a particular option is best for Jefferson. A memorandum that simply gives a yes/no answer or that simply states the best option without any explanation will not receive credit for the assignment. Lastly, your memorandum should not just list out calculations or charts (these are not needed), you must EXPLAIN your analysis with your words. Due Date The due date is Friday, December 7, 2018. Submission Requirements You are to turn in a printed copy of your memo on the listed dates. Late submissions for this assignment will not be accepted. Format The format of the memo should be similar to the memo used here (i.e. you may use the Title and To from and re format of this document). The memo should be 12 point font, Times New Roman, single spaced. The minimum page requirement is 1 page. The maximum page limit is 2 pages. Any submission that falls outside of these limits will not be graded. I have included a rubric for how this assignment will be graded on blackboard. Citation & Referencing The information that you need to complete the assignment is located in the book. Therefore, you do not need to cite any information that you receive from the book (I will assume that youve gotten this information from the book). Extra Credit Opportunity You can earn extra credit by citing primary authority. Refer to Chapter 16 for differences between primary and secondary authority.